Former FTX Chief Executive Sam Bankman-Fried.
Credit: Reuters File Photo
New York: Sam Bankman-Fried, the former cryptocurrency mogul who was convicted of fraud, was sentenced to 25 years in prison Thursday, capping an extraordinary saga that upended the multi-trillion-dollar crypto industry and became a cautionary tale of greed and hubris.
Bankman-Fried's sentence was shorter than the 40-50 years federal prosecutors had recommended, but above the 6 1/2-year sentence requested by the defense lawyers. A federal probation officer had recommended 100 years, just under the maximum possible penalty of 110 years behind bars.
The sentence was handed down by Judge Lewis A. Kaplan at the U.S. District Court in Manhattan. Bankman-Fried, 32, was in the courtroom, clean shaven and wearing a loose fitting brown jail uniform.
Before the sentence was delivered, Bankman-Fried apologized to FTX customers, investors and employees. "A lot of people feel really let down, and they were very let down," he said. "I'm sorry about that. I'm sorry about what happened at every stage." He added that his decisions "haunt" him every day.
The sentencing signified the finale of a sweeping fraud case that exposed the rampant volatility and risk-taking across the loosely regulated world of cryptocurrencies. In November 2022, Bankman-Fried's crypto exchange, FTX, imploded virtually overnight, erasing $8 billion in customer savings. At a trial last fall, he was convicted of seven counts of fraud, conspiracy and money laundering.
His sentence ranks as one of the longest imposed on a white-collar defendant in recent years. Bernie Madoff, who orchestrated a notorious Ponzi scheme that unraveled during the 2008 financial crisis, received a 150-year sentence in 2009. He was in his 70s at the time and died 12 years later. Elizabeth Holmes, who was convicted of defrauding investors in her blood-testing startup, Theranos, was sentenced to 11 years and three months in 2022.
A representative for Bankman-Fried didn't immediately respond to a request for comment.
Just 18 months ago, Bankman-Fried was a corporate titan and one of the youngest billionaires on the planet. With his face plastered on billboards and magazine covers, he could raise money seemingly at will. He hobnobbed with actors, musicians and superstar athletes, cultivating an image as a nerdy do-gooder who intended to donate all his wealth to charity.
Based in the Bahamas, FTX was one of the largest marketplaces for cryptocurrencies -- an easy-to-use platform where investors could exchange dollars or euros for digital coins such as bitcoin and ether. Its valuation was north of $30 billion.
But over less than a week in November 2022, a run on deposits exposed an $8 billion hole in FTX's accounts. Bankman-Fried resigned, handing over power to a team of lawyers who promptly filed for bankruptcy. The next month, he was arrested at his luxury apartment in the Bahamas and charged with stealing from customers to finance billions in political contributions, charitable donations and investments in other startups.
The investigation moved with startling speed for such a complex case. Within months, three of Bankman-Fried's top deputies, including a former girlfriend, pleaded guilty to fraud charges and agreed to cooperate with prosecutors. Bankman-Fried was initially granted home detention, but the judge revoked his bail in August after ruling that he had tried to intimidate witnesses, and sent him to the Metropolitan Detention Center in Brooklyn.
At the trial in October, Bankman-Fried's former colleagues testified for the prosecution, telling a jury that they had conspired with him to loot customer accounts. When he took the witness stand, Bankman-Fried seemed evasive at times, repeatedly claiming that he couldn't remember crucial details of his FTX tenure.
After he was convicted, Bankman-Fried's lawyers and family embarked on a long-shot campaign to secure a lenient sentence and rewrite the public narrative about FTX's failure. In a sentencing memo, Marc Mukasey, one of the defense lawyers, argued that Bankman-Fried had sometimes behaved strangely on the stand because he was autistic. He also cited the mogul's charitable initiatives, arguing that FTX was supposed to be a force for good in the world.
But the defense's case centered on the money that FTX users lost when the exchange went under. Mukasey claimed that customers were set to be made whole in the bankruptcy process, putting the losses caused by Bankman-Fried's actions at "zero."
The government rejected that argument. While FTX's new leadership has predicted that customers will eventually get their deposits back, the money they receive will be equivalent to the dollar value of their holdings in November 2022 -- and won't account for a recent surge in the crypto markets that sent bitcoin to its highest-ever price.
Bankman-Fried "demonstrated a brazen disrespect for the rule of law," prosecutors wrote in a sentencing memo. "He knew what society deemed illegal and unethical, but disregarded that based on a pernicious megalomania."
Kaplan said Thursday of FTX's victims: "The defendant's assurance that they will be paid in full is misleading. It is logically flawed. It is speculative."
Over the past several weeks, the prosecutors filed dozens of letters from victims of Bankman-Fried's crimes that laid out how the financial losses had devastated their lives. One customer said FTX's collapse led to "suicidal thoughts."
"Sam Bankman-Fried has to think for the rest of his life of the multitude of lives he destroyed with his selfishness and superficiality," the customer wrote. "I really hope that justice will teach him the difference between life and video games."
One FTX customer, Sunil Kavuri, who lost $2 million in the cryptocurrency exchange's implosion, spoke at the sentencing hearing. "I've lived the FTX nightmare for almost two years," he said.
Mukasey sought to distance his client from other fraudsters. "Sam was not a ruthless financial serial killer who set out every morning to hurt people," he said, adding, "Really, he's an awkward math nerd."
Bankman-Fried has vowed to appeal his conviction, hiring a lawyer from the law firm Shapiro Arato Bach to oversee that effort.
But Bankman-Fried appeared to accept on Thursday that he would be in prison for some time. "At the end of the day, my useful life is probably over now," he said.